Opportunity cost abounds

You know the old economics term: opportunity cost? It’s a helpful tool when looking at economic development. Wikipedia’s definition is not quite perfect but it works:

Opportunity cost is the theoretical cost of passing up the next best choice in making a decision in a perfect world.

Basically, in economic development terms, opportunity cost means being rigorous and very thoughtfull with how you are spending taxpayer dollars. For example, one might say that $4 million to attract Van Halen for a concert on PEI is a good expense. Some creative consultant armed with a set of input-output tables might even show a $4.1 million payback on that government investment (economic effect on the local economy).

However, even if you buy the $4.1 million argument (and I say beware of that), you still need to do an opportunity cost assessment and compare that $4 million investment in Eddie Van Halen’s rehab to spending $4 million on training 200 people on the skills to work in the animation industry or $4 million on expanding Slemon park or $4 million to set up an investment/trade office in India for the next 6-8 years.

Opportunity cost.